TORONTO (Reuters) - The Toronto Stock Exchange's main index tumbled almost two percent yesterday, as a sharp drop in the price of oil pulled energy shares lower and new inflationary fears also weighed on the market.

Eight of the 10 main groups of the benchmark finished lower, including energy, which led the declines with a fall of 4.64 percent.

The drop came as the price of US crude plunged almost $5 per barrel after China said it will raise domestic fuel prices in a move likely to reduce demand in the world's second biggest consumer.

The S&P/TSX composite index fell 282.98 points, or 1.88 percent, to close at 14,790.15.

"The strong demand in China is part of the reason oil prices have stayed high," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.

"I think the market is very strongly reacting to the expectation that we'll see weaker demand, and that should also mean weaker prices."

Canadian energy mammoth EnCana Corp shed C$5.35, or 5.5 percent on the day, finishing at C$92.06 as most large oil firms sold off. Petro-Canada joined the pack, falling C$2.51, or 4.3 percent, to close at C$56.54.

"We get these days when the commodities take a beating and then we're down over 200 points," said John Kinsey, portfolio manager at Caldwell Securities Ltd. "

"It's just something that we're going to have to live with."

But the losses did not end there, as the composite's resource-laden materials group gave up 1.46 percent and financials fell 0.98 percent.

Inflationary concerns flared anew as data showed that Canadian consumer prices rose 2.2 percent in May, up from a 1.7 percent rise in April, on sharply higher gasoline prices. The data also underlined a new Bank of Canada focus on the dangers of inflation.

"I think it's something to be keeping an eye on," Ms. Warne said of inflationary concerns, adding: "I don't think inflation is going to be a long-term problem, but I think it's going to be a short-term focus."